Like the majority of Orange County, the North and Central commercial real estate submarkets experienced much of the same market trends in the first quarter: continued increases in vacancy rates across all sectors, juxtaposed against slow but strengthening demand.
These trends could indicate that the overall commercial real estate market in the county now may be at, or may be close to, the bottom.
Combined, the North and Central County submarkets include more than 3,400 commercial properties totaling nearly 179 million square feet, which holds an average vacancy rate of less than 10%—with the exception of the office market.
Construction of new space remains almost non-existent with only 496,000 square feet of industrial space in the development phase.
Demand continued to show slow momentum through the first quarter of the year, as evidenced by the 282,000 square feet of absorption across all types of buildings.
Office
The vacancy level for office space in North and Central County increased in the first quarter to 18.1% from 15.4% in the first quarter of 2009. This decline in occupancy partially can be attributed to 288,524 square feet of negative absorption. Although not as dramatic as witnessed in past quarters, the average asking lease rate for available space in these submarkets continues to decrease, dipping 2 cents from the previous quarter to $1.98 per square foot.
Industrial
The industrial market—which is made up of 2,543 manufacturing and warehouse buildings and 184 research and development buildings—saw an increase in activity this quarter. There were 1.8 million square feet of leases and sales recorded this quarter, representing an increase in activity of more than 40%.
The increased demand counterbalanced the amount of vacant space coming onto the market this quarter, resulting in 653,937 square feet of absorbed space.
This also led to a decreased vacancy rate, which now stands at 5.2%.
Lease rates for both the manufacturing and warehouse and research and development sectors decreased to 51 cents and 63 cents per square foot, respectively.
Retail
The vacancy rate ticked up to 8.6% for the 279 retail centers in the North and Central County submarket, which total 44 million square feet. Current economic conditions have led many retailers to close locations or hold off on expansion plans. There was negative 83,223 square feet of absorption recorded in the first quarter.
There are no retail centers in the construction phase.
The average asking lease rate declined from $2.29 per square foot in the fourth quarter to $2.26.
Data and analysis by CB Richard Ellis Group Inc.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
